Rural utility operations could see biggest changes since 1940s

The Louisiana Public Service Commission members are, from left to right are: Lambert C. Boissiere III, D-New Orleans, Foster Campbell, D-Bossier Parish, Eric Skrmetta, R-Metairie, Mike Francis, R-Crowley, and Craig Greene, R-Baton Rouge.
Advocate Photo by Mark Ballard

State regulators and the electric cooperatives that serve about 900,000 Louisiana customers are nearing a deal that would make the most sweeping changes since the 1940s in the way the rural utilities operate.

​BY MARK BALLARD | MBALLARD@THEADVOCATE.COM
Originally published in The Advocate JAN 21, 2019 - 6:07 PM

Both sides are agreeing on term limits for board members and how much they’ll be reimbursed for attending meetings. But some co-op board members are wanting to keep their health insurance, which was one of the perks that prompted the five-elected members of the Public Service Commission to recommend restrictions.

“This is the most expensive benefit enjoyed by these part-time directors, and in my view any reform proposal must include this restriction,” Commissioner Foster Campbell, D-Bossier Parish, wrote his colleagues Monday about talk of letting co-op board members keep their health insurance. “What is troubling to me is that I got the impression these co-op leaders believe they have the votes at the PSC to retain this benefit. If so, we would be perpetrating a sham on 900,000 co-op members to benefit 100 directors.”

​“It would be hard for me to see an agreement with insurance in it, but it is a negotiation,” said Commissioner Lambert C. Boissiere III, a Democrat whose district stretches up the Mississippi River from New Orleans to Baton Rouge.
Health insurance – paid for by the customers of rural electric cooperatives – accounted for about half the $2.5 million received by the volunteer board members in 2017, according to a financial accounting the PSC ordered before proposing the new rules in November. The regulations would forbid the co-ops from providing board members with health and life insurance, cap per diems at $200 a day, and set term limits.

When the non-profit cooperatives were established during the New Deal, the idea was to pool enough rural residents together to pay for electricity out in areas commercial utilities, which are allowed a profit, found too costly to service. But a few of cooperatives, like DEMCO in suburban Baton Rouge, have grown substantially as residential developments have moved into once rural areas.

Because the position is supposed to be voluntary and part-time, the 96 board members serving on a dozen rural cooperatives are legally forbidden from receiving pay.

Commissioners were startled to learn in September that board members received an average $26,250 in 2017 alone – some individuals made as much as $50,000 – in per diem payments for attending meetings. They received compensation for travel, and many had an array of benefits, like health insurance.

Customers each month generally pay for the expense of acquiring and delivering electricity. The money for the board members expenses come out of what’s leftover after those bills are paid. PSC commissioners argue that much of that “operating margin” for the nonprofits could be used instead to lower customer rates.

Jeff Arnold, chief executive officer for the Association of Louisiana Electric Co-ops, said Monday the trend across the nation is for co-ops to either do away with health insurance for directors or to provide the same insurance co-op employees receive. But that’s an issue for the co-ops themselves to decide.

Arnold said the co-ops generally oppose one-size-fits-all rules because each organization operates in a unique environment that requires individual business models. He questions whether the regulators, who decide rates, have the authority to mandate the business structures co-ops put in place to operate their utilities.

He also noted that a couple of the Louisiana cooperatives voted to stop providing insurance to their board members. But that was a decision the individual co-ops made because it made sense to their business structures, he said.

“At the end of the day, some of the co-op boards already have done a lot of things suggested by the PSC,” Arnold said.

“There’s a broad range of differences among the co-ops in our state. We’re trying to streamline that. Most of the co-ops in the country are doing some kind of insurance. We’re still looking at that,” PSC Chairman Mike Francis, R-Crowley said Monday, adding that co-op board members are performing a public service like legislators do and deserve some sort of way to defray their expenses.

A private report published in February 2018 for the National Rural Electric Cooperative Association, which represents 900 electric cooperatives nationwide, and the National Rural Utilities Cooperative Finance Corp., which helps with utilities finances, recommended against providing directors with medical insurance. The report, written by a task force, said providing insurance for part-time board members could, among other things, increase the cost of insurance for full-time employees.

But the national groups haven't taken any position on providing insurance for co-op board members.

“We are very near a general consensus on term limits, quorum for the election of board members, and disclosure of board member benefits,” Commissioner Craig Greene, R-Baton Rouge, wrote Monday in a text. “There is still work to be done as it pertains to the actual financial benefit caps on various items, insurance being one of them.”
​
Greene added that the PSC is looking at several ways to address the fiscal issues.

Click here to view original Article